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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.






2. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply






3. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power






4. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good






5. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






6. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good






7. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






8. Ed = 8 - infinite change in demand to price change






9. Models where firms are competitive rivals seeking to gain at the expense of their rivals






10. Costs that change with the level of output. If output is zero - so are TVCs.






11. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






12. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital






13. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately






14. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.






15. Exists at the point where the quantity supplied equals the quantity demanded






16. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






17. Product demand - productivity - prices of other resources - and complementary resources






18. MUx / Px = MUy/Py or MUx/MUy = Px/Py






19. 0 < Ei < 1






20. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






21. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good






22. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






23. The additional benefit received from the consumption of the next unit of a good or service






24. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax






25. The difference between total revenue and total explicit costs






26. The output where ATC is minimized and economic profit is zero






27. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption






28. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good






29. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






30. A good for which higher income increases demand






31. A good for which higher income decreases demand






32. Exists if a producer can produce more of a good than all other producers






33. Ed = 0 - no response to price change






34. ATC = TC/Q = AFC + AVC






35. The rational decision maker chooses an action if MB = MC






36. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient






37. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand






38. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand






39. The sum of consumer surplus and producer surplus






40. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices






41. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity






42. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary






43. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.






44. Ei = (%dQd good X)/(%d Income)






45. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






46. Occurs when LRAC is constant over a variety of plant sizes






47. The most desirable alternative given up as the result of a decision






48. The marginal utility from consumption of more and more of that item falls over time






49. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good






50. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly